The Paradox of Commoditization
Gordon Cook
cook at cookreport.com
Thu Apr 10 15:48:40 UTC 2003
Hi David Bigge and Peter Galbavy, Peter K and James St Clair
David's point first.....
of course people will pay for convenience and will pay for phone
service. phone service is not going away and bankruptcy won't make
the lecs go away. bankruptcy will transform them (at least i hope
it will). My point was not intended to be JUST VoIP....although VoIP
is, i believe, the current most powerful force driving
commoditization and the rate at which it is being adopted will make a
bad situation much worse for the LECs.
The future, in addition to a commodity end-to-end IP net where
everything rides IP as an application is in areas like linux and open
source. What fascinates me is that I see interesting evidence that
IBM gets the hypothesis I laid out. Everyone knows the huge amounts
IBM has invested in linux and i was also aware that IBM was
positioning itself in the user services and education area.
At VON i got first hand evidence of this. There was an IBMer from
the IBM Institute for Business Value in Chicago on one of the panels.
Afterwards I grabbed him and we talked one on one for 90 minutes.
ABSOLUTELY AMAZING....... if there is such a thing as an
Isenberg-Googin-Cook school of thought, he is a full fledged
member... IBM ....big huge.... former mainframe.... now
decentralized. Plunging head long into customer education..... IBM
GETS IT!
Customer education, consulting, and services is the area that will
stay solid and likely grow. Virtually everything else will shrink.
Will it shrink by another million in the US? It could but it will
likely take a few more years. My point in the essay was to encourage
folk to think about the commoditization dynamic. I had not thought
about it in quite the same way myself before. no one can predict
what the time table will be.
Telecom and IT won't go away, but they will never in the future
operate with anything like the same economics and employment patterns
that they did as recently as 2 or 3 years ago.
Peter K's point
As for sounding like David Isenberg. Absolutely. And Roxane Googin
as well. the net paradox URL cited is as much googin as isenberg.
Apparently at the spring VON 2002 Isenberg, Googin, Anders Comstadt
of Stokab the municipal dark fiber net in stockholm which is making
a profit, and Tim Horan of CIBC had a panel in a breakout room with
15 people in the audience. This year at 5pm april one the same four
were in the main auditorium talking to an audience of about 800. the
wisdom is spreading.
Peter G's point,
sorry -- it was anything but a very thinly veiled jingoistic plug for
'Made in USA' It is my best attempt to report what i see. And
that is that " made in the USA" is to some extent history...like it
or not. This part is reality and inexorable. It was a lament for
the stupidity of my own government in the form of the FCC and the
current congress critters for not understanding how the duopoly
approach to broadband is cutting our own throats from the point of
view leaving us with a second rate and expensive infrastructure upon
which our future economic activity depends. The same commoditization
is affecting European telcos for sure. The question is whether the
EC will deal with the dynamics more intelligently than we have in the
US.
Question: Is telecom a sick industry? If it is, then you regulate
it like the FCC has been doing in the US. If on the other had you
see telecom as a sick underlying infrastructure on which economic
growth depends then you better think of doing treating the industry
in a way different than you would if you were just trying to preserve
share holder value.
Jim St Clair's point
largely agree. Think big picture cost point of view. To deliver
voice as a telco what does your current infrastructure COST, and what
is its complexity? Give cost, complexity and debt service how can
you compete against another player who is delivering its service via
IP over gig E and doesn't need to buy all that complicated legacy
switching gear. And increasingly large enterprises are going to
themselves deliver telecom services. Case in point is IBM which on
march 3rd i believe announced a huge project to globally convert to
voice over IP. To do so they will rip out token ring in all their
offices and install ethernet at a minimum estimated cost of $100
million. the calculation is that they will save more than that on
their phone bills and via use of SIP proxies they can get new
features of tailorability in voice service that cannot be gotten from
the PSTN
many thanks - now back to your regularly scheduled operational issues
--
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prices at http://cookreport.com/subscriptions.shtml The Paradox
of Commoditization -
Studies in VoIP and Telecom Economics, April -June 2003, 128 pages
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http://cookreport.com/12.01-02.shtml and http://cookreport.com/12.03.shtml
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